Chemical and Chemical Products Industries | The Canadian Encyclopedia


Chemical and Chemical Products Industries

Chemical manufacturing entails the conversion of one material to another by a chemical reaction on a commercial scale. The starting material (feedstock) can be a natural substance or a relatively pure chemical used as an "intermediate" for subsequent upgrading.

Hydrocarbons (ie, carbon-containing compounds) separated from natural gas or petroleum are the most commonly used raw materials for petrochemicals, which range from relatively simple gases (eg, ethylene) to more complex solid compounds (eg, polyethylene). Other "organic" chemicals are also based on hydrogen and carbon and may be derived from coal, sugar or similar nonpetroleum materials.

Coexisting with thousands of organic compounds are inorganic chemicals, ie, chemicals normally obtained by processing various nonpetroleum minerals (eg, common salt, limestone, potash, metallic ores) or atmospheric gases. Such classifications, historically evolved, are less precise than they might be. For example, inorganic nitrogen fertilizers, which embody atmospheric nitrogen in chemical combination, are not generally manufactured without burning natural gas for its hydrogen content.

History in Canada

At the turn of the century, the electrolytic production of chemicals was hailed as one of the modern marvels. Canada, having what then was estimated as 40% of the world's unharnessed hydroelectric potential, gained a modicum of attention as a home of large-scale chemical plants. Thomas Willson, a native of Princeton, Ont, built the first successful electric furnace to make calcium carbide from coke and lime and, in 1896, set up a manufacturing plant at Merritton, close to Niagara hydraulic power. He participated in the establishment of Shawinigan Carbide Inc on the St-Maurice River in Québec, which began production in 1904.

Meanwhile, 2 German chemists discovered that the nitrogen extracted from the atmosphere could be combined with the calcium carbide in a furnace to produce calcium cyanamide. The ability to "fix" atmospheric nitrogen in solid form meant that world agriculture no longer had to rely so heavily on Chilean sodium-nitrate deposits as the source of nitrogenous fertilizers. The North American licensee chose to exploit this new technology in a plant established on the Canadian side of Niagara Falls.

By 1907 the electrochemistry that gave birth to 2 chemical multinationals (Union Carbide and American Cyanamid Company) had become a prominent part of Canada's nascent chemical-manufacturing industry. Along the Ottawa River, another furnace installation gave the country a local source of elemental phosphorus. William T. Gibbs used the since-depleted phosphate deposits along the Lièvre River in Québec as the raw material. He finally sold the Buckingham plant to a British firm in 1902 because the courts declared he was contravening the latter's patent.

Public awareness of chemical manufacturing rose sharply after 1914, when Canada was suddenly deprived of her main sources of potash, cyanide, dyestuffs and certain pharmaceuticals. One response to the exigencies of war was a concerted effort to commercialize organic syntheses based on acetylene, the flammable gas generated from calcium carbide.

Shawinigan Water & Power undertook the task of manufacturing key chemical intermediates (acetaldehyde, acetic acid and acetone) from acetylene in a separate manufacturing facility. Shawinigan was the chemical centre of Canada for the next few generations, producing vinyl resins and plasticizers as well as the organic intermediates. Other chemical firms located near the falls to make hydrogen peroxide, cellulose film, chlorinated solvents, chlorine and caustic soda.

WWII hurried the transition from electricity to oil and natural gas as the wellspring for chemical products. Shawinigan plants played a role in building up a munitions industry in Canada from 1939 to 1945. But this was the era of continuous processing of petroleum-refinery and other hydrocarbon products. Ammonia plants were built with government funds in Calgary, Alta, Trail, BC, and Niagara Falls, Ont, so that the operators could manufacture nitric acid and ammonium nitrate, the latter an effective blasting agent.

Other wartime plants emerged, the most ambitious being along the western shore of the St Clair River in Ontario. Japanese occupation of the Far East rubber plantations prompted the Canadian government to pool the resources of 4 rubber-tire manufacturers, a Michigan styrene producer and a Sarnia petroleum refiner. The Crown-owned Polymer Corp (known today as Polysar) was launched as an integrated supplier of several synthetic rubbers.

Once hostilities ceased, the direction of postwar chemical manufacture was dictated by the fact that Sarnia had a network of petrochemical plants. Discovery of oil at Leduc, Alta, and completion of a pipeline from Alberta to Sarnia confirmed the St Clair River area as Canada's "chemical valley" during the next quarter century. A comparable buildup of petrochemical activities took place near Montréal, where a concentration of 6 petroleum refineries at the east end of the island provided an ample supply of both gaseous hydrocarbon byproducts and relatively low-cost naphtha.

Shawinigan's manufacture of organic chemicals was gradually transferred from the St-Maurice River location to the St Lawrence Valley (particularly Varennes on the south shore), but others in the Montréal complex invested in thermoplastics (polyethylene and polypropylene) manufacturing.

Most of the installations in Montréal and Sarnia were modest by world standards and Canada still was not in a position to compete effectively in export markets. The US Gulf Coast states had come to dominate international trade in petrochemicals (including the major thermoplastics and manmade fibres) because producers there had access to low-cost natural-gas liquids.

By the late 1970s, the dramatic rise in world oil prices, coupled with the increase in known natural-gas reserves in western Canada, altered the global economics of petrochemical manufacture. Several rounds of tariff reductions negotiated through the General Agreement on Tariffs and Trade (GATT) also changed market patterns.

The result has been a pronounced preference by the larger chemical producers for investments predicated on natural-gas or associated liquids surplus to Canada's fuel requirements. Alberta has been home to several petrochemical works ever since the wartime ammonia plants were built. Two Edmonton-area developments of the 1950s presaged this migration to the West, although the construction of several pipelines to central Canada improved the viability of projects centered in Ontario. But the prospect is that Alberta will host most of the new world-scale manufacturing plants and that an increasingly important aspect of the chemical industry in Canada will be the efficient movement of large volumes of synthetic resins, organic intermediates and fertilizer materials to the US and to tidewater points.

Chemical manufacturers stepped up capital spending rapidly, beginning in 1976. In the earlier part of that decade, they were collectively investing less than $200 million a year on plants and equipment. By the early 1980s petrochemical producers alone had committed about $1.2 billion annually. Two large ammonia-based fertilizer projects were also completed during this time.

Many projects were conceived when rising world oil prices and specific energy policies within Canada created a favourable climate for these investment decisions. The onset of the recession in 1981 and a downturn in petroleum prices led to the postponement of several ventures.

The Modern Industry

Canada's chemical industry is traditionally segmented into eleven categories, the two largest of which make industrial chemicals (inorganic and organic in nature) and primary plastics. Together the two constitute almost one half of the aggregate industry shipments. Agricultural chemicals, pharmaceuticals, coatings, cleaning compounds, toiletries and a myriad of formulated specialties constitute the balance. In aggregate the sectors in 1996 were responsible for shipments of $28.7 billion (Canadian) or 7.4% of the total manufacturing activity in the country.

Location of Plants

A handful of chemical companies produce a wide range of products, grossing over $1 billion each, but there are dozens of smaller companies as well. Almost 400 separate manufacturing plants in Canada produce at least one chemical for general sale. Most are located in central Canada because of the proximity of large cities, but every province, except PEI, has at least one chemical manufacturing operation. Some are associated with other processing activities: a petroleum refinery at Dartmouth, NS, for example, has for many years separated two olefins from motor gasoline ingredients for export as chemicals.

Undoubtedly Alberta has become a more attractive location for new investment because of an assurance that feedstocks will be available at predictably low prices over the lifetime of a new facility. The province has the added advantage of having two existing plant complexes, the one in Lacombe county attached to the Alberta Ethane Gathering System and the other at Fort Saskatchewan with even more extensive pipeline connections and excellent storage capacity as well. A number of new projects have been announced with the object being to expand production capacities of several Alberta plants by the year 2000.


The large commodity chemicals can be successfully produced in Canada only with adequate economies of scale. This worldwide trend to higher levels of minimum scale has increased the influence of large multinationals endowed with sizable technological and financial resources and with global marketing skills (see Foreign Investment).

Several major Canadian-owned corporations, however, have moved into the chemical business because they were already working in related areas. Cominco, Noranda Inc and Sherritt Gordon Mines branched out into fertilizer manufacture. Nova Corporation invested in petrochemicals as a corollary to its position in natural gas and associated liquids. Polysar, which had been set up to produce a few key petrochemicals during WWII, evolved almost logically into an international purveyor of synthetic rubbers before it was acquired by Bayer Corp.

In the late 1970s various government agencies committed funds to chemical manufacture. The Société générale de financement established Ethylec Inc to participate in the Petromont consortium, operating 2 petrochemical plants in the Montréal area. The Potash Corporation of Saskatchewan acquired several operating potash mines in the province and, once privatized, invested further in fertilizer manufacturing. Petro-Canada is now a vendor of certain aromatic chemicals (benzene, toluene, xylenes) as a result of its purchase of the Petrofina interests in Montréal.


The chemical industry is not built around any single technology. There are almost as many processes as there are establishments; the same product is often synthesized using different chemical engineering practices. Most processes have originated outside Canada. Yet Canadian chemical producers have consistently spent a significant percentage of gross income on industrial research and development.

A membership survey by the Canadian Chemical Producers' Association confirmed that chemical companies spend an average of about 1% of sales on R&D ($100 million annually); Statistics Canada reports total expenditures rising from $75.8 million in 1983 to $97 million in 1995, although as a percentage of company revenues they fell from 1.25% to 1.09%.

Work Force

In 1995, 27 287 people were employed in the chemical industry. These figures are down from their 1989-90 peak as a result of the effect of the recession in the early 1990s. The petrochemical sector employed 15 166 persons while the inorganic chemical sector had 10 410 employees and the organic and specialty chemicals sector had 4138. Chemistry and engineering are common disciplines within the chemical industry and educational levels are high. In the petrochemical sector in 1985, for example, 2669 (18.5%) employees had a university degree.

Canadian chemical workers do not belong to a single union. By far the largest, however, is the Communications, Energy & Paperworkers Union of Canada, which has organized employees in most of the large petrochemical plants in the country.

Energy Consumption

The chemical industry accounts for 23% of energy used by all manufacturing industries in Canada. By most standards, the chemical industry is energy intensive, but not more so than certain other industries such as the pulp and paper industry or the primary iron and steel industry.

Through the Canadian Industry Program for Energy Conservation, the chemical industry has been striving to use energy more efficiently, if only to be more competitive in world markets. By 1990 the chemical industry had reduced its energy usage per unit of production some 35% since the base year of 1972. A more recent report notes that carbon dioxide emissions as a percentage of the constant dollar value of industry sales dropped by 10% between 1992 and 1995.

International Trade

The manufacture of chemical products in Canada has been altered significantly since 1988 by new international trade arrangements. Even those industry sectors relying primarily on a domestic market have restructured to take into account the relatively free movement of goods across borders. Nevertheless, most of the growth in manufacturing activity has occurred in those production centres dedicated to supplying commodities for a global clientele. The value of exports in 1996 was, at $12.6 billion, over three times higher than it had been ten years earlier. Canada's commitment to the FTA and then to NAFTA has resulted in a yet higher percentage (to 79.6% of the total) of shipments to the USA.

Chemical imports have kept pace with exports. In the 1990-96 period they rose in value by 118% to a total of $18.4 billion. Virtually all of the increase can be attributed to the greater integration of the Canadian and US economies. The traditional flow of goods east to west has been modified to include a much greater flow south to north as manufacturers restructure their marketing.

The restructuring process is especially evident in manufactured products aimed at the consumer. Imports of cleaning compounds, toiletries, etc tripled in value during the six-year period. On the other hand, exports of Canadian-made pharmaceuticals approached $900 million in 1996 (from $250 million in 1991) and the increase for organic coatings was 350% in the same time span.

Government Control

For many years there was no coherent government policy governing chemical manufacturing. It received about the same general tariff protection as other manufacturing sectors and Petrosar received some indirect federal support when the Crown-owned Canada Development Corporation acted as one of the principals. Ottawa has accepted the concept of 3 petrochemical centres in the country (Montréal, Sarnia and Alberta).

The 1980 National Energy Program had a bearing on the fate of these centres in that it established different pricing regimes for petroleum and natural gas. For many years, a significant 10%-20% tariff applied to chemicals not manufactured in Canada, but GATT negotiations have eroded this protection. In any event, Canadian export industries and agriculture have had access to duty-free imports through end-use drawbacks or other exemptions from the general tariff policy adopted by successive federal administrations.

Environmental Considerations

Since chemicals are often toxic and have other adverse characteristics, they must be handled carefully during both manufacturing and transport (see Hazardous Wastes). Thus, antipollution devices have been introduced into plants, and occupational health and safety considerations receive great emphasis (see Occupational Disease).

Adverse effects on the environment and on the health of specific communities have been documented. Mercury was released into waterways from certain chloralkali plants until it was shown in the 1970s that this heavy metal was being dissolved and incorporated into food chains. Mercury electrolyzers have since been shut down, fitted with special cleanup devices or replaced with electrolytic cells using a different technology.

In other cases the production of chemical products believed to cause environmental problems has been affected. Certain fluorocarbons, once used extensively as refrigerants, blowing agents and aerosol propellants, provide a good example; their production in Canada was eliminated and replacements found after scientific studies indicated that they rise to the stratosphere and destroy ozone, which protects life on Earth from the sun's ultraviolet radiation.


The chemical industry's commercial interests are most often handled through the Ottawa-based Canadian Chemical Producers' Association (founded 1962). Many employees of the chemical companies are professional chemical engineers or chemists and are therefore usually members of the Canadian Society for Chemical Engineering (CSCE) or the Chemical Institute of Canada (CIC).

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